AVA WEALTH
Consultancy
Spending a lifetime growing your wealth and now start to reap the fruits. However, how are you going to manage your wealth better? Set up a Trust!
What is a Trust?
A Trust is a legal arrangement where asset ownership is transferred from the person who set up the Trust (settlor) to another person/corporation (Trustee) for the benefit of one or more people (beneficiaries). The beneficiary holds an equitable interest in the asset even though the trustee has legal ownership. A trust can be created to fulfill various objectives such as education expenses, charitable objectives, successive generations, creditor protection and investment.
Why need to set up a trust?
Trust is created for the benefit of one or more ascertainable beneficiaries. In addition, Trust is for preservation, compared to Will. Once a Trust is set up, your intention will be preserving the capital (the tree), at the same time, your beneficiaries still can enjoy the fruits. Comparing to Will, Trust is more likely for long term. If both husband and wife pass away in the same accident and leaving minors behind, and they aren’t financially capable to handle the assets, this is where the Trust can help in this scenario.
The most common reason when clients want to set up a Trust is the worries of the financial securities for the spouse and children, especially when the client is the main income earner. They want to set up a Trust because they want to distribute the assets quickly upon death. If you go through a Will, you still need to go through a Probate process for a period. Especially if you have minor children, all your assets will be stuck there; the children's basic maintenance, education or even living expenses will become the problems.
Types of Trust
There are wide varieties of Trusts available in Malaysia. For instance, Living Trust, Testamentary Trust, Private Trust, Single Parent Trust, Insurance Trust, Special Child Trust, Family Trust, Golden Age & Healthcare Trust, Charitable Trust, Investment Trust, Property Trust, etc.
6 terms that you need to know before setting up a trust
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Settlor - the one that set up the Trust, the owner of the Trust
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Beneficiaries - the people whom you wanted them to benefit from the assets (eg. spouse, siblings, children, parents, etc)
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Trustee - the party (person/ corporation) who handle and manage the Trust
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Protector - monitors the practices of trustee and advises the trustee on the needs of the beneficiaries, watching over the benefits of the beneficiaries when the owner is no longer around
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Trust Asset - the assets inside the Trust
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Trust Period - how long you want the Trust to last for
Can I determine the trigger event like when will the Trust kicks in?
Yes, normally there will be three types of trigger events. First is upon death, second is TPD, coma or mental disability and third is a critical illness.
What kind of assets that you can put inside your Trust?
It can be shared in a private limited company, landed property, bank accounts, unit trust, investment accounts, and life insurance.
How can the Trust period be determined?
You can have the Trust ends after several years like after your youngest surviving child reaches 25 years old or after the death of a particular person.
Life insurance is a popular and the most economical way to fund your Trust. We would recommend clients to take up life insurance when they have the capabilities to purchase one. You will only get RM1 if you put RM1 in Trust. However, if you use that RM1 to buy insurance, it can bring you RM5/ RM6 in return at the end of the day when you are no longer around.
In terms of having a bigger fund size, insurance is definitely a safer bet. The client can also have a mixture such as more than one policy in the Trust followed by the cash that they want to pump into the Trust.
Since the latest products available are more and more complicated, please contact us for a free explanation!